S&P ups Cap Gemini outlook to stable

Standard & Poor's said it revised to stable from negative its outlook on Cap Gemini SA after the company reported significantly improved figures for the second half of 2005. S&P also affirmed the company's BB+ long-term corporate credit and senior unsecured debt ratings.

Revenues were up a solid 10% during the fourth quarter of 2005 over the fourth quarter of 2004, largely reflecting the continued ramp-up of recently-won outsourcing contracts, the agency said. Continued cost-cutting, improving controls and the disposal of several loss-making units pushed the EBITDA margin up to 7.8% in the second of half 2005 from 4.4% in the first half.

S&P predicted that Cap Gemini's revenue growth will slow in 2006, to come back in line with market trends of mid-single digit growth. The slow ramp-up of profitability (particularly in outsourcing) and high competition on Cap Gemini's markets should put operating margins after depreciation in the mid-single digit area in 2006, the agency said.

Funds from operations' coverage of net debt at year-end 2005 was more than 1x, and gross debt to funds from operations coverage was slightly above 20%.

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